Managing finances can be challenging for anyone, but it can be particularly difficult for those without a steady paycheck, such as freelancers.
Freelancers are responsible for paying for their own benefits and taxes as self-employed individuals. In fact, FreshBooks’ Money Matters: The Freelancer Finance Report revealed that people who work for themselves experience various challenges, specifically when managing money.
Here are some key findings from the study:
- 37% of freelancers have a hard time finding new customers
- 1 out of 4 freelancers cite cash flow as the major challenge in running their own business
- 35% of freelancers struggle significantly with financial management
You may experience inconsistent income as a freelancer, making managing your finances incredibly challenging. Unlike traditional employees, who receive a set salary or hourly wage, freelancers often earn varying amounts of money from project to project. This inconsistency can make it difficult to predict how much money you will earn each month, and it can be challenging to maintain a healthy budget.
To help you address these challenges and gain financial control, here are some helpful money management tips to help you maintain healthy finances and achieve your financial goals.
Rule for Managing Money
With fluctuating expenses and inconsistent income, staying on top of your finances and achieving your goals can take time and effort. Fortunately, some guidelines can help you manage your money effectively, such as the 50/30/20 rule.
What is the 50/30/20 rule?
The 50/30/20 rule is a known budgeting strategy that suggests allocating 50% of your income towards needs, 30% towards wants, and 20% towards savings. This rule ensures that you meet your essential expenses while still enjoying the benefits of hard work and planning for the future.
Adhering to the 50/30/20 rule may require adjusting your lifestyle and spending habits. However, it’s an excellent framework for managing your money effectively and ensuring you stick to your budget. It also allows you to avoid any financial mistakes that may put you in debt.
The first component of the 50/30/20 rule is allocating 50% of your income towards needs. Essential expenses like rent or mortgage, utilities, groceries, transportation, and other necessary expenses are non-negotiable and must be paid every month to maintain a basic standard of living. This 50% rule allows you to live within your means and avoid overspending on essential expenses.
The second component of the 50/30/20 rule is allocating 30% of your income towards wants. Everyone has unique lifestyle choices that allow them to indulge in certain luxuries. Examples of wants may include dining out, going to the movies, taking a weekend trip, and hobbies.
When you allocate 30% of your income towards wants, you can enjoy the fruits of your labor and indulge in your passions while still maintaining a healthy budget.
The third and final component of the 50/30/20 rule is allocating 20% of your income toward savings. Prioritizing savings is crucial to building a safety net for unexpected expenses, planning for retirement, and working towards achieving your financial dreams. This includes emergency funds, retirement savings, and other long-term financial goals.
Money Management Tips
Several money management tips can help you monitor your finances and achieve your financial goals. Here are some proven tactics:
1. Have a financial goal
A financial goal is important because it gives you a clear direction and purpose for your finances. Staying motivated and focused on making financial progress can be easier with a specific plan. Setting a clear financial goal helps you identify the steps you must take to achieve that goal and allows you to track your progress.
For example, if your goal is to save for a down payment on a house, you can create a budget to set aside a certain amount of money each month towards your savings goal. This budget can include cutting back on unnecessary expenses and looking for ways to increase your income.
2. Keep track of your expenses
By monitoring your expenses, you can identify areas where you’re overspending and make necessary adjustments to your budget. For example, if you spend too much on eating out, you can reduce your restaurant visits and cook more meals at home.
You can also limit your spending in different categories and find ways to save money without compromising your lifestyle. The key is to find a method that works best for you and make it a habit to record your expenses regularly.
3. Improve your money mindset
Having a positive money mindset can make all the difference when managing your finances. This means cultivating an optimistic and confident outlook about your financial future. It involves believing you can achieve your financial goals and taking actions that align with those beliefs.
One way to improve your money mindset is to focus on abundance rather than scarcity. This means shifting your mindset from one of lack and limitation to one of abundance and opportunity.
Instead of focusing on what you don’t have or can’t do, focus on what you do have and what you can do. By doing so, you can break negative patterns and overcome financial obstacles.
4. Figure out the habits that drain your budget
The key to figuring out the habits that drain your budget is to be honest with yourself about your spending habits and identify areas where you can make changes. This means looking closely at your spending habits and understanding where your money goes each month.
One helpful approach is to analyze your spending patterns and identify your triggers. For instance, you tend to overspend when feeling stressed or bored or shopping with friends. Once you’ve identified these triggers, you can consciously avoid them or find healthier alternatives.
5. Separate accounts
Having separate accounts can help you stay organized and make tax time less stressful. You’ll have all your business-related transactions in one account, making calculating expenses and reporting your cash flow easier.
Moreover, separating your accounts can help you avoid personal liability for any business-related expenses or legal issues. It’s also easier to manage your cash flow and determine your profitability with separate accounts.
6. Pay yourself first
Freelancers are responsible for managing their finances and ensuring they have enough money to cover personal and business expenses. It can be tempting to prioritize paying bills and other expenses before paying yourself, but this can lead to financial stress and a lack of savings.
Paying yourself first means prioritizing saving a portion of your income before paying any bills or expenses. By automatically transferring money into your savings account, you can ensure that a part of your income goes directly into savings every month without manually transferring the money.
7. Start investing early
Investing early is essential to building wealth and securing your financial future. When you start investing early, the more time your money can grow and compound, which can result in significant returns over time.
Starting with a small investment, even just a few hundred a month, is a great way to start. Over time, you can gradually increase your contributions as your income grows and your financial situation changes.
8. Save as early as you can
One of the benefits of being a freelancer is the ability to work from anywhere and choose your own hours. However, this flexibility comes with the responsibility of managing your own finances. Unlike traditional employees who receive a regular paycheck, freelancers have to be proactive in saving money to cover their living expenses and plan for their financial future.
Starting to save early is key to building a solid financial foundation. You may have months where you earn a significant amount of money, followed by periods of time where you struggle to find work. However, by starting to save early, you can build a financial cushion that you can rely on during leaner times.
9. Save for retirement and emergencies
Emergencies, like unexpected hospital bills or car repairs, can happen at any time. An emergency fund can help you cover these expenses without dipping into your savings or going into debt.
Similarly, retirement savings is crucial to ensure a secure financial future. Retirement may seem far away, but it’s never too early to start planning and saving for it. The earlier you save for retirement, the more time you can build a comfortable nest egg for your golden years.
10. Have a side hustle
Starting a side hustle requires effort and time commitment, but it can be a great way to achieve your financial goals and improve your overall financial well-being. A side hustle can be anything from selling products online to freelancing or offering services in your spare time.
Finding a side hustle that aligns with your skills and interests and allows you to maintain a healthy work-life balance is essential. With dedication and perseverance, a side hustle can be a valuable addition to your financial portfolio.
11. Use a money management app to save and invest
Using financial tools can be helpful in managing your finances. This is where Beppo comes in: this intuitive money management app allows freelancers like you to send invoices, track your budget, get assisted tax filing, and receive tax estimates.
Here are the Beppo features you will enjoy:
- Streamlined tracking and management: Consolidate your income and expenses into a single platform, making it easy to track and manage your finances.
- Multiple invoice channels: Send invoices to your clients via multiple channels, including SMS, Viber, and email. This ensures that your clients receive timely and professional invoices.
- Budget automation: Set budget limits and automate your budget, streamlining your financial management process. This helps you stay within your budget and avoid overspending.
- Tax planning: Get estimates of your taxes, so you become aware of how much you need to pay and avoid any costly surprises.
- Networking opportunities: Connect and network with other freelancers to exchange tips, ask for advice, and build professional relationships.
- Professional tax assistance: Beppo offers professional assistance when filing your taxes to ensure accuracy and compliance. This feature saves you time and reduces the stress of navigating complex tax regulations.
Want to enjoy more benefits? Check out Beppo’s Basic Plan that’s powered with 12 more features:
- Freelancer Credit Card
If you need help obtaining a credit card from a traditional bank, Beppo can assist you in getting started by issuing you one.
- Multi-Currency Invoicing
With Beppo’s multi-currency invoicing feature, you can invoice clients in their local currency, such as USD, AUSD, HKD, and more.
- Automated Recurring Invoices
With Beppo’s recurring invoice feature, freelancers who bill clients regularly can save time and effort, allowing you to set up invoices systematically and schedule them to be sent to the same client with just a few taps.
- Automatic Invoice Payment from Clients
With “Vaulting” mode enabled on recurring invoices, clients can pay your services automatically based on the set due date and stored bank details. This feature ensures you get paid on time without chasing clients for payments.
- Automated Payment Reminders
Beppo’s automatic payment reminder feature saves you the financial trouble of sending reminders to clients manually. It keeps you on top of your finances by quickly reminding clients (and yourself) that payment is almost due or overdue.
- Advance Invoice Payment Collection
When you need money quickly, Beppo can help by providing an advance payment on your invoice.
- Gcash Integration
Beppo’s integration with Gcash makes it more convenient for freelancers to track and receive their money.
- Marketplace Discounts
Get access to discounted financial products and services. This feature helps you save money on essential financial services like accounting, tax preparation, and other financial services.
- Personalized Budget Tracker
Our customizable budget tracker feature helps you create a personal budget that suits your needs. This lets you track your income and expenses and plan your finances more effectively.
- Advanced Templates
Beppo offers a range of ready-made templates to help freelancers scale their businesses, from service agreements to project proposals.
- Beppo Academy for Freelancers
Beppo Academy provides freelancers access to advanced content that can help them grow their businesses, such as marketing strategies and financial management.
- In-App Live Chat Support
Beppo’s chat support feature allows freelancers to get real-time help and support, whether they have questions about using the app or need tax assistance.
12. Talk to a professional
Talking to someone who can help you manage your finances and run your taxes will go a long way, especially in improving your financial situation. Thankfully, Beppo can assist you through its community feature or one-on-one chat with a professional. You can also talk to other freelancers to get money management tips.
Importance of Money Management
Managing your money effectively is a crucial aspect of life that should not be overlooked. It may seem overwhelming or tedious at first, but the importance of money management cannot be overstated.
Here are some reasons why money management is essential:
1. You will be able to have a better plan for your future. When you practice good money management, you can plan for big-ticket expenses such as purchasing a home, saving for your children’s education, or starting a business.
2. You will feel secure since you are on track with your savings and investment. Knowing that you have a solid savings plan and investment strategy can give you peace of mind and a sense of financial security. Effective money management ensures that you have enough savings to handle unexpected expenses and have the leverage to grow your wealth through investments.
3. You will be motivated to earn and save more money naturally. By monitoring your spending habits, you can identify areas where you can cut expenses and increase your savings. This can be a motivating factor to earn more money and create additional income streams to help you achieve your financial goals.
4. You will develop self-discipline. Money management requires discipline and consistency. This discipline can extend to other areas of your life, such as health and fitness, career, and personal relationships.
5. You can start setting and achieving your goals. Effective money management involves setting realistic and achievable financial goals. Achieving your financial aspirations for you and your family can provide a sense of accomplishment and motivate you to set even bigger goals in the future.
6. You will learn risk management that will help you build a financially stable life.
Managing your finances also involves understanding the risks associated with investments, debts, and financial decisions. By learning how to manage risk, you can make informed decisions and reduce the chances of financial losses. This knowledge can help you build a financially stable life and prepare for unforeseen events.
7. You will gain control over your finances. Money management gives you control over your finances rather than letting your finances control you. This means you can create a financial plan that aligns with your values and goals.
8. You will not stress over money in the future. By practicing good money management, you can avoid financial stress and anxiety in the future. You will have a solid savings plan, investments, and a clear understanding of your financial situation. This can help you avoid living paycheck to paycheck and the stress that comes with it, giving you more time and energy to focus on other areas of your life.
Implementing proper money management practices can have a profound impact on your future and overall well-being. It allows you to live a financially stable and stress-free life.